The turning tide - the precarious life of a consultant

Posted by barrmar
barrmar
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on Thursday, 14 October 2010
in General Blogs

Life is like a wheel. In my case it is quite a big wheel. One minute I am at the top. Then, almost without warning, at rock-bottom. 

It is a cycle that seems top repeat itself with monotonous frequency. It is a cycle that has got me looking into a whole range of other options for making a living. 

Starting a business is one of my options. The main problem is lack of capital. I had a small amount of capital nine years ago when I was retrenched. That went very quickly. My wife was petrified that a business would swallow up the funds and then fail, leaving us with nothing. As it happened, the finds went, leaving us with nothing. 

This time there is an extra complication. The client ( a very major company) has not paid my employer. They are not too worried, but the agent that employed me and pays me has panicked. He has not been paid for four months and refuses to pay me before he is certain of payment. 

So I sit at home awaiting my September payment. We live on fresh air. Life has become bleak. 

It is amazing that so much can change so quickly.

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Doolally
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Doolally Friday, 15 October 2010

Shame. I hope things look up for you.

Dissol
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Dissol Saturday, 16 October 2010

Barrmar; I hope this works out for you. It is a precarious life being a consultant (unless you land lucky like my brother, and sell your consultancy business for many millions (of pounds!) and can swan off into the distance!). I know what it is like to have cash flow problems in a small business, and unfortunately, there appears to be a prevailing habit in SA - the bigger the company (or government department), and the smaller the consultancy means longer & longer delays in payments. We have several outstanding accounts relating to FIFA work... I am sure it will come in eventually...but the time spent waiting is no good for a small company. Unfortunately, most small business fail, not because they are bad businesses, but because of cash flow problems. In each business that I have set up (each one is still in business, although I am only still connected to 2 of them), then cash flow has been king. Often it meant living like paupers for a few years to build up cash reserves to see us through the leaner times. There were many months, when we first started when I would pay all the bills, pay my staff, put some money aside in the bank...only to find that there was nothing left for me. Fortunately I have some personal reserves that can see me through those periods... The other ploy I try to do is to spread the risk, and try to have several smaller clients rather than one or two big ones.

The other issue in all this is that the present SA legal system makes it incredibly difficult for a small business. If a client just refuses to pay you (as I have experienced) then it is basically not worth chasing through the courts, unless it is more than R500,000, and preferably a lot more. But few small consultancies deal in invoices of these amounts. The amount we were talking about was around R130,000. Not a lot of money to a large company, or government department...but can be several months survival for a small consultancy. My client just basically refused to pay, as he knew it was not worth me chasing through the arbitration courts. Because I am a mean bugger, and there was a principle at stake, I did take him to arbitration. The judge even opened the proceedings by saying it was ridiculous to come to court for such a small amount... We won. Fortunately we won with costs, and interest. The client ended up paying out R650,000 (not including his own legal fees!!). That was the original amount + interest + my lawyers fees + court costs + travel & accommodation (as the case was in Jo'burg). But I had to have around R500,000 to be able to risk to get back my R150,000. If we had lost (even on a technicality) then it would have just all gone. Few lawyers will take a case on no win, no fee...certainly cases like this. The court costs should be much much less...but then again you are reminded that only 2 professions solicit as a way of doing business...prostitutes...and lawyers...

barrmar
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barrmar Saturday, 16 October 2010

Thanks Dissol. Unfortunately, it is not worth taking this to court - the company will pay eventually. It just causes a massive cash-flow crisis for me.

Dissol
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Dissol Sunday, 17 October 2010

Barrmar, I do feel for you - I have been there (and in some ways, am always skirting the area you are in). It is not nice. If all my clients paid the invoices in time, then I would be very happy... Each month, I have to spend a couple of days chasing money. This is wasted time. It is sad, but as this time has to be covered somehow, and it increases our fees in the end. I try to work out the bad payers beforehand, and allow for the extra time in chasing in their quote... There are some stories yet to be told from some of the projects around the FIFA world cup. Several projects, we, and other consultants had to threaten to stop work, until bills were paid... There is still a considerable amount outstanding from some projects... What is annoying, is we know all the bigger contractors have already been paid in full...and we small contractors have to wait, end in line, from clients who can afford to settle all their debts on time.

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